In any competition, one needs to know his or her own advantage in the game. In the game of investing, every investor needs to know his or her advantage. The small and individual investor has some advantages that the guys running billion dollar hedge funds wished they had. A smart investor takes these advantages and uses them when playing the ultimate game: investing. I hope you do too.
Fast and nimble.
Does anyone remember Long-Term Capital Management (LTCM)? The highly leveraged fund that burst in spectacular fashion in 1998? They got creamed in by the Russian bond debacle. So you may ask “If they realized that they were in a terrible position, why didn’t they get out?” The truth is, they very much wanted to get out, but they couldn’t. Their position was too large, and if they tried selling even a fraction of their position, they would have moved the market against themselves.
In times of a market panic, the thing that everyone wants but is lacking the most is market liquidity. Everyone wants to sell, but hardly anyone wants to sell! This is where the small individual investor has an advantage. While the big guys watch in agony looking at the ever increasing red numbers on the screen, the small guy can easily close his position (even in times of little market liquidity).